Ulrich Sedelmeier

Rachel A. Epstein

The European Union’s (EU) membership conditionality has been perceived as a highly effective means of influence on non-member states in the run-up to the 2004 and 2007 enlargements. According to the incentive-based explanation that dominates the literature, conditionality has been particularly effective when the EU offered a credible membership incentive and when governments did not consider the domestic costs of compliance threatening to their hold on power. This volume challenges much of the existing work on EU enlargement and postcommunist transition, however, by testing the conditionality thesis in the post-accession setting. Whereas a conditionality hypothesis would predict deteriorating compliance among the newest member states, several contributions here actually find the opposite. Enduring compliance among postcommunist states with the acquis, as well as with less formally institutionalized EU preferences for economic liberalization and minority protection, calls into question the role that conditionality plays in eliciting conformity. Simultaneously, support for the conditionality hypothesis in areas such as political party development and EU relations with Turkey and the western Balkans suggests conditionality’s effects vary across countries and issues. As the first study to systematically examine the relationship between international institutions and postcommunist states after enlargement, this volume provides new insights into how external actors exercise their power in domestic politics. This book was published as a special issue of the Journal of European Public Policy.

Postcommunist Europe after EU enlargement

International Influence Beyond Conditionality

States and banks have traditionally maintained close ties. At various points in time, states have used banks to manage their economies and soak up government debt, while banks enjoyed regulatory forbearance, restricted competition, and implicit or explicit guarantees from their home markets. The political foundations of banks have thus been powerful and enduring, with actors on both sides of the aisle reluctant to sever relations. The central argument of this book, however, is that in the world's largest integrated market, Europe, the traditional political ties between states and banks have been transformed. Specifically, through a combination of post-communist transition, monetary union, and economic crisis, states in Europe no longer wield preponderant influence over their banks. Banking on Markets explains why we have witnessed the radical denationalization of this politically vital sector, as well as the consequences for economic volatility and policy autonomy. The findings in Europe have implications for other world regions, which, to varying degrees, have also experienced intensified pressure on their traditional models of domestic political control over finance. Through an investigation of foreign bank behavior in economic crises, the developmental consequences of political control over banks and the emergence of European Banking Union in the Eurozone, the book advances three main findings. First is that foreign bank ownership need not necessarily lead to economic vulnerability of host states. Second is that marketized bank-state ties do, however, limit pathways to catching up in the global economy. And third is that European Banking Union has strengthened the euro's credibility while cutting down substantially on Eurozone member states' economic policy discretion. This book details the intense political struggles that have underpinned all three outcomes. Co-Winner of the 2018 Ed A Hewett Book Prize awarded by the Association for Slavic, East European, and Eurasian Studies.

Rachel A. Epstein

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